Home prices in U.S. fell less than forecast in year to May

July 31 (Bloomberg) -- Residential real estate prices declined less than forecast in the year ended May, another sign that the housing market is on the mend.

The S&P/Case-Shiller index of property values in 20 cities decreased 0.7 percent from May 2011, the smallest 12-month fall since September 2010, after dropping 1.8 percent in the year ended April, the group said today in New York. The median forecast of 29 economists in a Bloomberg News survey projected a 1.4 percent fall.

Stabilizing prices could help drive a housing market that’s starting to recover three years after the end of the recession. Federal Reserve policy makers have said residential construction is a bright spot in the recovery even as unemployment remains a concern to households.

“This is great news that certainly bucks the trend of other data that points to an economy that’s slowing,” said Ellen Zentner, a senior U.S. economist at Nomura Securities International Inc. in New York. “it’ll be a salve for a lot of U.S. households if we continue to see price gains in housing.”

Consumer spending stagnated in June as Americans used the biggest gain in incomes in three months to boost savings, indicating a weak handoff to the second half of the year, figures from the Commerce Department also showed today. Household purchases, which account for about 70 percent of the economy, were unchanged after a 0.1 percent decrease the prior month that was previously reported as little changed.

Stock Futures

Stock-index futures were little changed after the reports. The contract on the Standard & Poor’s 500 Index maturing in September fell less than 0.1 percent to 1,379.4 at 9:24 a.m. in New York.

Estimates in the Bloomberg survey ranged from declines of 0.8 percent to 2.6 percent. The Case-Shiller index is based on a three-month average, which means the May data was influenced by transactions in April and March.

Home prices adjusted for seasonal variations increased 0.9 percent in May from a month earlier. Unadjusted prices climbed 2.2 percent in May as all 20 cities showed gains.

“We need to remember that spring and early summer are seasonally strong buying months, so this trend must continue throughout the summer and into the fall,” David Blitzer, chairman of the S&P index committee, said in a statement. “The housing market seems to be stabilizing, but we are definitely in a wait-and-see mode for the next few months.”